After IPO launch, Slack looks for even faster enterprise growth

After IPO launch, Slack looks for even faster enterprise growth

With Slack now officially listed on the NYSE, the collaboration software vendor finds itself at a crossroads: after five years of rapid growth, it has to figure out how to build on its success and expand into even more companies and industries

Stewart Butterfield (Slack)

Stewart Butterfield (Slack)

Credit: Slack

Slack’s recent public listing on the New York Stock Exchange marks the latest chapter in the company’s remarkable rise since its launch five years ago.

More than 10 million people use Slack on a daily basis and it has become integral to workflows in a variety of industries.

The app is widely credited with reinvigorating the team collaboration market, now worth US$3.5 billion globally, and has attracted a host of big-name competitors including Microsoft, Google and Facebook.

Slack rebuffed early acquisition attempts by several big tech firms (reportedly including Microsoft and Amazon) to show it can succeed on its own.

Now, the company is poised to capitalise on the booming interest in team collaboration and channel-based communications. The company still sees opportunity ahead: in a recent S1 filling, Slack pegged the overall market value at US$28 billion.

There are a number of tactics it can take as it looks to push further into the enterprise, fend off rivals while also evolving its own software to meet the changing needs of an increasingly digital workforce.

Winning over large enterprises

In many cases, Slack first enters an organisation with smaller deployments on a team-by-team basis, with pockets of usage popping up across different divisions.

In recent years, the company has sought bigger, wall-to-wall deployment deals, leading to the creation of its Enterprise Grid offering. At the same time, it has added security and management features designed to appeal to CIOs and IT admins as well as compliance certification to ease entry into highly regulated sectors.

But with established vendors like Cisco and Microsoft also turning their focus to team messaging, a relative newcomer like Slack faces competition for those lucrative enterprise deals.

The ability to win over these large organisations may come down to Slack’s ability to convince CIOs to invest in a standalone collaboration setup rather than choosing apps offered by rival products’ suites. To do so, Slack needs to show it can serve as the central hub for getting work done across all business teams.

“Slack’s success will be determined in the short-term based on the answer to one question: ‘Can Slack prove to the enterprise buyer that it is more than a chat app, more than a collaboration tool, but instead an enterprise collaboration platform?’” said Michael Facemire, vice president and principal analyst at Forrester.

“If Slack can do this, expanding out of a tech-savvy user base and into all parts of the business become much easier as it starts to do work for everyone,” Facemire said.

Converting users from its free to paid tiers or Enterprise Grid is another challenge, he said. “Many companies have multiple instances of free Slack in use. But this group of users faces their first hurdle when these free accounts need enterprise governance (single sign-on, message retention rules, etc.).

“Will Slack be able to prove the value of both paying the fee and doing the work to integrate in with existing systems? This question will also signal how quickly it can succeed in an enterprise market,” Facemire said.

Expanding its reach

Slack quickly won over a devoted following among developers and engineering teams with a vast array of third-party integrations and in-depth functionality. And it’s generally regarded as having an intuitive user interface. But winning over employees that are less receptive to new technologies and ways of working can be challenging.

“As it tries to expand beyond its initial core base – including dev ops, IT and knowledge workers - it will have to make its user interface more friendly to employees that might not be as tech-savvy, but can benefit from workflow automation and third-party integrations,” said Raúl Castañón-Martínez, a senior analyst at 451 Research.

A more simplified user interface could help, said Angela Ashenden, a principal analyst at CCS Insight. “Although it’s fundamentally based on chat and messaging, which should be straightforward for people to embrace, the extensive use of hashtags and slash commands give the platform a very technical feel, which can be off-putting for non-technical users,” she said.

“The mobile experience also needs a lot of attention, as it’s currently more of an add-on rather than a core experience,” Ashenden said.

The mobile app is particularly important for engaging users who may not be desk-based and for whom the app would be their primary way of using Slack, said Ashenden. “Right now, the platform orients around the desktop/browser experience, and its usage reflects that.’

Slack has had success attracting knowledge workers. But other types of front-line roles, such as clinical, retail or hospitality staffers - often regarded as underserved by digital technology - also represent an opportunity to widen the app’s use across organisations.

“Slack has done extraordinarily well, but we can expect it will continue to prioritize user growth,” said Castañón-Martínez. “To do so, it could consider going after ‘deskless’ workers, including front-line workers in verticals such as retail, manufacturing and healthcare. This is something that competitors like Microsoft Teams and Workplace by Facebook are already doing.”

To attract these workers, Slack could look to third-party AI partners that offer alternative interface options, such as voice commands, he said.

“An interesting idea could be integrating speech-enabled applications for workers in professions or verticals where a ‘hands-free/heads up’ approach - as in the case of workers in healthcare and manufacturing, for example - makes more sense than a text-driven user interface.”

Outside the U.S., more opportunities

Slack, unsurprisingly, has a strong presence in the U.S., but more than half of its daily active users are located outside of the country; Japan is its second-biggest market and one of its fastest growing.

However, all Slack data currently resides on Amazon Web Services in the U.S., which could have implications for customers operating in countries with strict data sovereignty laws.

As a result, the company will need to consider establishing data centres in other regions to support growth.

“One other major thing Slack needs to invest in is hosting locations outside the US – this is very important if Slack wants to build its growth in Europe, in particular,” said Ashenden. “It’s also going to be critical for global enterprise customers that need to meet different compliance requirements in different regions.”

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